Business group proposes compromise on carbon price

A major business lobby group is proposing a compromise solution to the political impasse over the carbon tax.

The Australian Industry Group says the fixed carbon price should be scrapped in favour of an immediate switch to an emissions trading scheme, with the price floated.

The group says that is a more practical alternative to the current carbon pricing model, as it will be difficult for the Coalition to unpick the tax if it wins government.

"We have to start with the reality here that both major political parties have said that they want to achieve a 5 per cent emissions reduction cut by 2020. Both parties are locked into that, the question is how they get there," explained the industry group's chief executive Innes Willox.

"So what we've proposed today is that we drop the carbon tax immediately - it's a dead weight cost on business at the moment - and move to an internationally linked emissions trading scheme which we're due to do in mid-2015 in any case."

Mr Willox says an immediate move to emissions trading could still be a prelude to removing carbon pricing altogether if the Coalition wins a majority in both houses of Parliament at the next election.

"The issue here is the axing of the tax, how would that occur, how long would it take, what cost would business have to incur in the meantime," he said.

"What we're proposing here is what we think are quite sensible strategies for all parties to reduce the cost on business while they work through to the next step."

Mr Willox says business would be very happy to consult with the Coalition on its direct action policies on carbon emissions, but would like to see some reduction to the cost impost on business in the meantime.

"If the Coalition wants to develop direct action further, we are obviously part of discussions with them about that, but it's a policy that is still being developed and is continuing to be developed," he added.

"The Coalition have made it very clear that they'll continue to consult on this and consult through the election period."

The Australian Industry Group says its proposal to switch immediately to emissions trading would be a face saving win-win for both sides of politics.

"This debate is going to gain momentum right through the election period, and it doesn't take away from either party putting forward their points about which sort of overall strategy is best, who's right, you know, all the political argy-bargy will occur in any case," Mr Willox said.

"This is a sensible policy approach which gives both parties the out, and it also gives some business some certainty."

Innes Willox says the group has put forward its proposal to both major parties, but will engage in further consultation to convince them of its merits.

"We believe this gives both major parties about 80 per cent of what they want and does help us move towards reaching that emissions reduction target that both have committed to," he added.